I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

The French Have Rumbled Amazon's Dastardly Plan

It’s not unusual for people to wonder what Jeff Bezos is actually doing over at Amazon. The company’s been going near a couple of decades now, is vast, has a huge turnover, but profits seem to be remarkably slim. And of course that is the aim of a company, to make a profit so that it can send cash back to its owners, the shareholders. This is the point of the whole game. So what is Bezos up to? It seems that the French have worked it out:

France’s culture minister has attacked Amazon, the online retailer, for deliberately undercutting traditional rivals to create a “quasi-monopoly”, in the latest assault by the socialist government on internet companies.

“Today, everyone has had enough of Amazon which, through dumping practices, smashes prices to penetrate markets to then raise prices again once they are in a situation of quasi-monopoly,” said Aurélie Filippetti, the culture minister.

Oh dear: but perhaps not all that surprising when you come to think of it. Given that the last Frenchman to actually understand economics was Bastiat and he died back in 1850. And we don’t normally expect culture ministers to really have all that much of a knowledge of the subject either: we’re too desperate trying to find a finance minister who has at least an inkling.

For the problem with this allegation is simply that not only do we have no evidence at all of Amazon doing this we’ve very little evidence of any company ever managing to do it successfully. We do know that Amazon isn’t currently doing it because the company just isn’t making profits of any scale. So they’re most certainly not exploiting some quasi-monopoly situation…..or if they are they’re being remarkably cack-handed in the way they try to. But as I say, there’s no evidence from anywhere of anyone managing to do it either.

Even Rockefeller and Standard Oil didn’t do it: sure, he pushed prices for oil down and he also made very large profits. But he didn’t then push the prices back up when he had indeed vanquished his foes: he kept on pushing them down. The reason for doing so because he know that as soon as you try to exploit such a monopoly then you generate exactly the competition, lusting for those monopolistic profits, that stops you from having a monopoly that you can exploit. And that’s why creating a monopoly through cutting prices isn’t a viable business proposition. Even if you do kill off all of your competitors, what’s going to happen next? You put your prices back up and an endless number of people will start new businesses to earn some of those lovely profits. And as long as you keep your prices high, they’ll earn some of those profits, destroying your monopoly. Thus, as I say, it’s simply a business plan that doesn’t work. You can indeed beat all your competitors: but you then have to keep the prices low in order to prevent the formation of new competitors.

So, cut throat pricing might put everyone else out of business. But so what? The consumers are going to continue to get those cut throat prices and given that it’s the consumers that the whole game of the economy is about then what the heck is wrong with that?

Except, obviously, in France*.

*Yes, I am an Englishman, yes, we do habitually make such comments about France. We would argue for good reason even if others dismiss it as mere prejudice.

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